Insights

The coronavirus pandemic has upended the year for people from Wuhan to Milan. New York City alone now has almost 100,000 confirmed cases and all nonessential businesses, including many in the fashion sector, have shuttered since March 22 in response to orders from the state governor and a collective effort to “flatten the curve” of coronavirus infections.

Workplace consequences have been dramatic. Last week, the federal Labor Department reported that a record 6.6 million Americans had filed for unemployment insurance, bringing the total number of people who have filed for unemployment in the last three weeks alone to almost 17 million. Reports of employers mistreating nurses and retail workers have trickled onto social media, and newly enacted federal laws provide various forms of emergency relief.

James Brudney, a professor at Fordham University School of Law with extensive experience in employment and international labor law, stressed the importance for employers, particularly larger brands, of “doing the right thing by their workers and in reputational terms, not just the barely legal thing.”

Referring to recent walkouts by Amazon warehouse workers protesting conditions of unsafe exposure to the virus, he said employment lawsuits based on job-related illness and death are likely, just as they were common post 9/11. In fact, there already has been one case filed in Illinois by the survivors of a late Walmart employee who claimed he died due to catching the virus at his workplace.

“One would hope that in these circumstances employers, who are also obviously suffering, would have the sense of both compassion and justice not to be taking retaliatory steps against workers who are trying to protect their fundamental safety and health in tough conditions,” said Brudney, adding that exposure to the coronavirus at work could lead to sizable state workers’ compensation claims. He recommended more generally that employers consult the International Labour Organization’s COVID-19 recommendations as well as Convention 177 on protections for home workers, saying that they provide a useful crisis benchmark for the fashion industry.

In this challenging context, what else should employers know? The interplay between federal and state laws, and between the President and state governors, is confusing to many American employers, and even more so to foreign companies doing business in the United States. Some important issues to get straight at the outset are:

Are my employees at-will? Are they exempt or non-exempt?

Most states consider employment to be at-will by default, meaning that either the employer or the employee can end the relationship at any time, with or without cause or notice. However, before letting anyone go or changing any terms of employment, employers must check whether they are bound by a contract with their employees instead. Employers should also know whether their employees are exempt or non-exempt under the federal Fair Labor Standards Act. Employees whose jobs do not meet the FLSA definition or who make less than $674 a week are non-exempt under federal law and must earn overtime pay. States and cities can raise the minimum amount, so that, for example, an employee must earn at least $1,125 a week in New York City to be exempt.

Can I reduce my employees’ hours?

Employers are allowed to reduce the number of hours their non-exempt employees are scheduled to work. Providing reasonable notice is considered good practice, though there is no federal requirement to do so and state laws vary. In California, for instance, notice is important to avoid “reporting time pay” obligations, which employers trigger when they schedule workers but don’t have enough work for them to do because of inadequate planning or lack of proper notice.

Can I reduce my employees’ pay?

Employers can never reduce pay rates for hours already worked; any changes must be prospective. That said, absent a contract, employers are free to reduce employee pay for future hours worked, as long as they pay at least the minimum wage, which varies by state and sometimes by city. For example, federal law sets the floor at $7.25, but while California’s minimum wage is $12 a hour, it’s $15 an hour in San Francisco. In addition, some states impose notice requirements. New York State requires employers to inform employees at least seven calendar days before changing their pay rate, unless the new rates appear explicitly on wage statements. Reducing an employee’s pay can change the employee’s status from exempt to non-exempt.

Can I treat my employees differently?

Reducing some salaries during a period of financial difficulty is legal as long as employers do not discriminate against a protected class under federal or state law. Federal law prohibits discrimination based on gender, race, national origin and age, but some states or municipalities go further. New York City, for example, prohibits treating employees differently based on their “age, race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, disability, predisposing genetic characteristics, familial status, marital status, domestic violence victim status, or any other protected characteristic under the New York State Human Rights Law.”

“If your reduced hours or furloughs disproportionately affect women, or racial minorities, or older workers, there’s likely to be an effort at some point to organize those workers in litigation terms, or at least it’s a risk that you run,” said Brudney. “You have to be sure you have an evaluation system that can justify what you’re doing so that it doesn’t look discriminatory or arbitrary.” Such a system could include records of past performance evaluations or bonuses, for instance.

What’s a furlough?

An employee furlough occurs when an employer suspends its workforce without pay. Caution: If exempt employees do any work at all while on furlough, the employer must pay them the equivalent of a full day’s salary, and if hourly employees work while on furlough, the employer must pay them for the time worked. Furloughed employees usually retain their health benefits and return to work either on a specific date or when a specific condition is met. Employers should note, however, that furloughs come with the risk that top talent will seek employment elsewhere. A furloughed employee may be eligible for unemployment benefits, depending on state rules.

What unemployment benefits are available to laid-off workers?

Individual states normally manage unemployment insurance benefits and determine eligibility criteria and exclusions. The $2 trillion federal CARES Act passed on March 27 creates two major benefit categories, however. First, there’s Pandemic Unemployment Assistance, which covers individuals — including freelancers and those who are sick or caring for a sick family member — who are unable to work because of the coronavirus outbreak. Secondly, unemployed individuals who are already receiving state benefits are eligible for $600 a week in additional federal aid over the next four months, until July 31.

What is a shared work program?

State shared work programs make it easier for participating employers to keep trained staff during an economic slowdown by allowing employees to receive partial unemployment insurance benefits while working reduced hours. To participate in a shared work program, employers must meet state requirements — typically, a minimum number of employees working in the state, and a certain amount of unemployment contributions over the past year — and submit a shared work plan for state approval. Participating employers may not hire new employees to perform work covered in the plan and must seek plan approval from any relevant collective bargaining representative.

What sort of paid leave do I have to pay my employees during the COVID-19 health crisis?

The Families First Coronavirus Response Act guarantees job-protected paid leave to workers who are unable to work from home and subject to a federal, state or municipal order of quarantine or isolation for COVID-19, or caring for minor children who are under such an order. The amount of paid leave available to employees depends on the size of the business as of Jan. 1, with different rules for small, mid-sized and larger businesses. All must provide their employees with job protection for the duration of the quarantine or isolation order, but larger businesses must provide more days of paid sick leave. When employees return from their COVID-19-related leave, employers must reinstate them to the same or a comparable position and continue to provide health insurance on the same terms as if the employee had not taken leave.

What sort of paid sick leave do I have to offer?

Until the FFCRA was passed, no federally mandated paid sick leave existed, though some states required it. Federal law now allows an eligible employee to take paid sick leave because the employee is in quarantine related to COVID-19, or caring for someone who is, or unable to work remotely because he or she is caring for a child whose childcare provider is closed because of COVID-19. Employers with fewer than 500 employees must provide full-time employees with 80 hours of paid sick leave at the employees’ regular rate (or two-thirds the employees’ regular rate for caregiving employees). Paid sick leave wages are capped at $511 a day, or $5,110 total, per employee for personal use, and $200 a day, or $2,000 total, per employee caring for another. Sick leave pay rates for employees who work a part-time or irregular schedule are based on the average number of hours the employee worked for the six months prior to taking leave. If employees have worked less than six months prior to taking leave, they calculate their rate based on their average scheduled hours over a two-week period.

Cynthia Martens is an associate at The Nilson Law Group, PLLC in New York. She was previously a WWD correspondent in Milan. This article is for informational purposes only and is not intended to constitute legal advice.

Originally published in Women’s Wear Daily